X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
WorldCom Inc. and Intermedia Communications Inc. agreed Thursday to amend the terms of their $5.9 billion deal, announced last September. The agreement ends months of legal wrangling brought against the two companies by minority shareholders in the Web-hosting company Digex Inc., which is 94 percent-controlled by Intermedia. In an announcement released after the close of trading, the share exchange in the merger was reduced to a fixed one-to-one ratio. Originally each Intermedia share would have been exchanged for 1.2 shares of WorldCom stock. The settlement also includes $165 million of WorldCom stock to be created for Digex shareholders. WorldCom and Digex also agreed to give WorldCom customers favorable terms on access to Digex’s Web-hosting services. After the deal closes, WorldCom also committed to make additional funding available for Digex over the next two years. The proposed settlement has been approved by the boards of all three companies. WorldCom was advised in the revised deal by J.P. Morgan Chase & Co. and the law firm of Cravath, Swaine & Moore. Bear, Stearns & Co. and the New York law firm of Skadden, Arps, Slate, Meagher & Flom LLP advised Intermedia. The deal still must be approved by the Delaware Court of Chancery. The original deal, valued at roughly $5.9 billion, called for WorldCom to acquire Intermedia for $3 billion in stock plus the assumption of $2.9 billion of that company’s debt. When the deal was announced, industry insiders viewed it as a roundabout way for WorldCom, the second-largest U.S. long-distance telephone company, to gain control of Digex without having to pay the high premium its investors would have demanded in an outright deal for the company. WorldCom had been outspoken about the importance of Digex to the deal and its goal of redirecting its operations to Web-hosting and data transmission, a market expected to grow to $17 billion in the next three years. Digex shareholders felt the same way as insiders and filed suit to halt the sale, claiming Intermedia’s directors did not act in accord with their dual responsibilities as Digex directors in approving the deal. The case revolved around Section 203 of the Delaware General Corporation Law, which forbids the owner of between 15 percent and 85 percent of the “voting stock” of a corporation from doing a deal with the corporation for three years after the shareholder comes into the stake. If the company approves the initial acquisition, the shareholder is not subject to the provision, but otherwise must gain the approval of the company’s board and two-thirds of its shareholders to override it. WorldCom asked the Digex board to waive Section 203, but it remains unclear whether the law even applies to Digex. Intermedia argued that its ownership interest exempted it and WorldCom. In his ruling on a motion for the preliminary injunction of the deal pending a full trial, Delaware Chancellor William Chandler found that Intermedia directors were negligent under Delaware law in approving the WorldCom deal on Digex’s behalf. A trial was set for May 14, but Chandler implied that Intermedia’s directors should seek a settlement in his opinion when he said that they could be liable for “monetary remedies” if the case went to trial. Copyright (c)2001 TDD, LLC. All rights reserved.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.